Corbynomics: Part 1

Although sharing many of the biases of the ‘alternative economic strategy’ developed on the left in Britain in the 1970s and 1980s, Corbyn’s economic programme is as yet no more than a pale reflection of the ideas of that era

Corbynomics is high on aspiration, low on detail. The aspirations were set out in a short document produced by the Corbyn campaign entitled simply The Economy in 2020. The key message set out was opposition to austerity. Corbyn said he wanted to rebalance the economy, ending austerity, downsizing finance and adopting policies to boost growth, investment and employment. He aims not only to stop cutting public services, but to start expanding them again. The budget will be balanced, partly because growth will be higher thereby boosting tax revenues, but also because higher taxes will be levied on the rich and on companies.

A deeper understanding of what Corbynomics might involve can be found in the Left Futuresblog and also in articles by a number of journalists, Chris Giles and Martin Wolf in the Financial Times, as well as Robert Peston, Larry Elliott and Aditya Chakrabortty. There has already been some debate as to how radical Corbynomics actually is. John Rentoul commented after Shadow Chancellor John McDonnell’s speech at the Labour party conference that there was nothing in it that could not have been said by his predecessor Ed Balls. This was unfair to Balls since he would never have agreed to sign up to George Osborne’s fiscal charter, which commits governments to fiscal balance on both current and capital budgets. Pressure from the new Advisory Economic Council of eminent economists established by McDonnell to advise the Labour party on its economic policy seems to have prompted the party’s U-turn on this front. Borrowing to invest in infrastructure and human skills makes Corbynomics appear to be at least in part a new form of Keynesianism, giving priority to expanding growth and jobs in the real economy over paying down debt and eliminating the deficit.

However, many of the blogs on Left Futures think Corbynomics is potentially much more radical than this. These arguments are based on an understanding of the political assumptions that lie behind it, which are rooted in the so-called ‘alternative economic strategy’ of the 1970s and 1980s developed by left-wing trade unions and MPs and championed above all by the late Tony Benn. It informed the thinking of Ken Livingstone’s Greater London Council in the early 1980s, from which many of Corbyn’s advisers are drawn. The starting point for the alternative economic strategy was that capitalism was in crisis and UK capitalism in particular. The established model of Keynesian political economy on which Labour governments had relied for so long was breaking down and was no longer capable of providing full employment, economic growth or rising living standards. A radical alternative was needed to defend the rights of trade unions and the large manufacturing base which still existed at that time.

Some of the versions of the alternative economic strategy which emerged went far beyond the kind of ‘Left Keynesianism’ proposed by the Cambridge Economic Policy Group which advocated reflation, import controls and incomes policy. In an article in Marxism Today in January 1981, Bob Rowthorn summarised the main policies as follows: reflation; import controls; price controls; comprehensive planning agreements; nationalisation of key firms and major financial institutions; new powers for workers and trade unions; withdrawal from the Common Market; expansion of social services; reduction in military expenditure; and redistribution of income and wealth. Even these policies, he noted, would still leave most economic assets in private hands and therefore would require the government to seek the cooperation of private business if it was to govern successfully and achieve its strategic aims.

Corbynomics may share many of the biases of the alternative economic strategy, but as yet it is only a very pale reflection of it as an economic programme. Corbynomics has a similar diagnosis that the old model of political economy has been shown to be flawed, and that a radical alternative is needed. But the institutional reforms it advocates to rebalance the economy are quite modest, consisting of a National Investment Bank to raise the rate of investment, gradual renationalisation of the railways and increased taxes on the rich and on companies. The political and economic climate has of course been transformed since the early 1980s. Trade union power and membership has shrunk, along with manufacturing, and the working class is disorganised and fragmented.

Against this background the prospects of Corbynomics making a radical difference might seem small. Its most likely way to make progress would be to focus on developing a Keynesian programme for ending austerity, coupled with an industrial strategy to promote a higher rate of investment and an export-led economy. The models here are China and Brazil. Yet, to be successful, such a policy would have to overcome some severe internal and external constraints, not least the reluctance of British companies to increase their investment substantially even with interest rates as low as they are. Substantial business support would be crucial for success, but other policies in the mix might make that hard to obtain.

A second possibility is that the Corbyn leadership throws caution to the wind and seeks strong controls over the economy in a fashion reminiscent of the alternative economic strategy. Gaining political support for such a strategy would be much harder because the accent would be on confrontation, rather than cooperation, with capital, using a discourse around class rather than the national economy. The redistribution of wealth and power would be a central objective in this strategy, the state being used to replace or control private capital rather than to complement it. Such a project may be what many supporters of Corbyn want, but the political conditions for embarking on such a course are far from being present at the moment, as McDonnell for one appears to recognise.

Indeed, even the first possibility looks a long way from being achievable in the current political climate. This might change if the world economy suffered a second major financial crash and recession. The political response to such a crisis might open the door to an alternative programme which was based on Corbynomics. A second possibility – if a new recession does not occur and the present recovery continues – is that the emphasis on austerity may fade and a new discourse centred on growth will replace it. If Corbynomics has developed a clear strategy and a set of detailed policies by then, Labour could be the beneficiary.